As ThinkProgress has been reporting, online retailers across the country currently benefit from an “Amazon Tax Loophole,” which allows big online sellers like Amazon.com to avoid paying the same sales taxes as traditional retailers. This tax loophole is costly to state budgets. For example, in “2011 alone, Wisconsin will lose an estimated $127 million in uncollected sales tax on purchases made online.”
Lawmakers in California, which has cut more than $1 billion from the University of California and California State University systems to tackle deficits, moved to close this loophole yesterday. The California Assembly passed the final bill that would require online retailers to collect sales taxes just like traditional retailers:
The last of three bills aimed at getting the Seattle giant and other out-of-state online retailers to pay sales tax passed the Assembly on Wednesday afternoon. “It’s something we’ve been working on for years,” said Assemblywoman Nancy Skinner, D-Berkeley, who authored the bill. “But this is the first time that so many businesses up and down the state are supporting it.”
The passage of the legislation marks one of the first major victories for closing the online retailer loophole nationwide. Previously, the South Carolina Legislature was successfully bullied into approving the loophole, and Gov. Rick Perry (R-TX) vetoed legislation that would’ve closed the loophole in his state. The California bills will now go to the state Senate, which previously passed a different version, and then the bills will be sent to the desk of Gov. Jerry Brown (D). Amazon has previously threatened to cut all affiliate ties with the state if it closes the online sales tax loophole.
The right wing has long sought the abolishment of the Internal Revenue Services (IRS) and advocated for replacing the income tax with a national sales tax. A proposal that encapsulates these policies is known as the “Fair Tax.”
While the Fair Tax has recieved little support in the past, Sen. Dick Lugar (R-IN) — who is facing a highly competitive primary challenger from the right — announced his support for the policy yesterday in a video to his constituents posted on YouTube. Watch it:
In announcing his support for the policy, Lugar bragged that “individuals would have more money to invest in jobs and growth.” Yet the fact is that the Fair Tax would be highly regressive and end up imposing a gigantic tax hike on the American middle class.
While Fair Tax supporters claim the tax — which would impose a 23 percent sales tax on most items — would actually end up benefiting all Americans thanks to a “prebate” Americans would get to be able to purchase basic goods, the truth is that almost all Americans would end up paying more taxes under the proposal.
Conservative economist and former Reagan adviser Bruce Bartlett points out that President George W. Bush’s tax reform panel concluded that all but the top quintile of American earners would actually pay more taxes under the Fair Tax. ThinkProgress has assembled this data in the following graph:
As economist Brad DeLong notes, the Fair Tax would impose a “mammoth tax cut for the crowd making more than $200,000 a year and a substantial tax increase for those making between $30,000 and $200,000 a year.” While there is certainly nothing wrong in asking for fair sacrifice and higher taxes on those who can afford them in order to pay for a great nation, there is something very perverse about a tax scheme that lowers taxes on the rich and dramatically raises them on the rest of society.
Have Mainstream Media Caught On To Tax Expenditures? |
Any serious effort to reduce the deficit will need to include clearing the tax code of what are known as “tax expenditures” — spending programs that are administered through the tax code. Subsidies for Big Oil are an egregious example, but “the amount the government spends on tax expenditures in real dollars has grown from $294 billion in 1977 to $981 billion in 2009 — an increase of more than 230 percent.” The president’s deficit commission and plenty of budget plans (including the Center for American Progress’) call for cutting this wasteful form of spending to reduce the deficit. Gadi Dechter from the Doing What Works project crafted this chart illustrating an uptick in the media mentions of tax expenditures over the last several months, showing that maybe this idea is catching on:
House Republicans, as part of their 2012 budget, have proposed dramatic cuts to food assistance programs, including cuts to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) that would prevent hundreds of thousands of eligible women and their children from accessing the program. Late last month, the House Appropriations Committee approved more than $830 million in cuts to WIC and millions more in cuts to the Emergency Food Assistance Program and the Commodity Supplemental Food Program.
To cut these programs with so many families still feeling the effects of the Great Recession is a travesty. But to do so after spending tens of billions of dollars to extend tax cuts for the richest 2 percent of Americans, as Republicans forced Congress to do back in December, is even worse. CAP’s Melissa Boteach and Seth Hanlon found that the cost of the GOP cut to WIC is equivalent to the cost of extending the Bush tax cuts for millionaires alone for just one week:
The deal struck last December to extend the tax cuts enacted under President George W. Bush gave the average millionaire a tax break of $139,199 for 2011, according to the Tax Policy Center, or nearly $2,700 per week. Given that about 321,000 households reported incomes of more than $1 million in the most recent year for which there are data from the Internal Revenue Service, that means the Bush tax cuts provide millionaires with about $860 million in tax breaks every week—more than enough to stave off the $833 million in proposed cuts to WIC.
The Hill reported today that Rep. Rosa DeLauro (D-CT) convinced GOP appropriators to reinstate $147 million of their $833 million in cuts to WIC, but she is not optimistic that the money will ultimately be approved on the House floor. “I don’t think [the Republicans] will let it stand. I think they will attack it on the floor,” DeLauro said.
Since taking office in January, Ohio Gov. John Kasich (R) has remained true to his “personal philosophy” of contempt for worker’s rights. In the first few months of his first term, Kasich single-handedly dismantled the collective bargaining rights for teachers, police, and firefighters even after public employees agreed to some of the nation’s largest pay cuts.
The prevailing wage is an hourly wage paid to the majority of workers in a particular industry. Ohio’s prevailing wage laws apply to all construction projects that cost more than $79,000. In his budget proposal, Kasich raises that threshold from $79,000 to $5 million, meaning a much greater number of Ohio construction workers could be paid less than the prevailing wage. Why? According to Kasich, fair pay “drives up the cost.”
Kasich’s unabashed assault on worker’s rights via Senate Bill 5 has earned him plummeting poll numbers and even a recall effort. But with this blatant attempt to weaken the prevailing wage laws, Kasich is losing his own party. State senators led by state Sen. Chris Widener (R) are breaking from Kasich to require “more public projects to pay union-negotiated rates.” Citing “philosophical differences” between the state Senate and Kasich, Widener is pushing a $1 million threshold because the prevailing wage guarantees “better work”:
Widener said he expects the Senate to lower it further, noting the national average is closer to $1 million. He said contractors who are paid prevailing wages are better trained and do better work.
“Prevailing wage is definitely a factor in terms of quality of projects in public works,” he said.
At $1 million, the limit would still be a more than 10 times the current threshold.
The state House has already lowered the threshold to projects costing more than $3.5 million. In recognizing the value of the prevailing wage and its correlation to better work, the GOP-led state Senate is certainly taking a “dramatic departure” from Kasich. However, the departure is also curious given the fact that these same Republicans are seeking to gut Ohio’s minimum wage law by reducing the number of workers that are eligible. However inconsistent these Republican lawmakers may be about worker’s rights, it’s safe to say they are still one step ahead of Kasich. Unfortunately, that is not a hard standard to surpass.
One of the companies on the list was mega-manufacturer Boeing, whose vice president of tax, James Zrust, was on Capitol Hill today, testifying on corporate tax reform before the House Ways and Means Committee. Even though Boeing hasn’t paid a dime in federal taxes over the last three years, Zrust still asked for a cut in the corporate tax rate:
Everyone here today is well aware that the combined US statutory tax rate is almost 15 percentage points higher than the average combined rate of other OECD member countries. It is our view that significantly reducing the corporate tax rate will improve U.S. competitiveness. We believe lowering the corporate rate would dramatically reduce tax policy pressure and rhetoric by ensuring that U.S. companies are competitive, and importantly, would not tip the scale in favor of foreign production.
Boeing is far from alone in paying nothing into the federal coffers in recent years. General Electric, for example, made $7.7 billion in pretax profits over the last three years, and collected $4.7 billion in tax benefits. And even when corporations are paying something, it’s far below the statutory 35 percent tax rate. Last year, Google used tax havens to lower its tax rate all the way to 2.4 percent.
Zrust did say tax expenditures — the credits and deductions clogging up the tax code — would have to be “on the table” if the corporate tax rate were to be reduced. And corporate tax reform is something that both parties in Washington have expressed an interest in getting done. But they’re been focused on reform that is either revenue-neutral or even costs the government money (thus increasing the deficit).
CTJ’s numbers show, though, that revenue-positive corporate tax reform is possible and, given the deficits the country faces in the medium- to long-term, desirable to avoid pushing more of the burden of deficit reduction onto the middle class. “Our elected officials have a duty to the American public to make reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy,” said Bob McIntyre, director of Citizens for Tax Justice.
Watch video of Rep. Pete Stark (D-CA) reacting with surprise to Boeing wanting a lower tax rate:
One of the most prevalent conservative mantras is that higher taxes kill job growth. Leading right-wing lawmakers have repeatedly used this belief to justify tax cuts for upper-income earners and oppose tax increases. In defending the Bush tax cuts for the richest Americans last fall, House Speaker John Boehner (R-OH) said he opposed “job-killing tax hikes.”
Yet the idea that higher taxes impede or retard economic growth isn’t generally backed up by the facts. Bloomberg News interviewed Joel Slemrod, who was is an economist at the University of Michigian and is a former senior economic adviser to President Ronald Reagan, about the issue. Slemrod pointed out that high tax countries tend to perform well economically and said that returning to Clinton-era tax rates in 2013 would not harm the economy:
“High GDP countries are high tax countries,” said Joel Slemrod, an economist at the University of Michigan’s Ross School of Business. “That doesn’t mean high taxes cause the high GDP.” [...] Slemrod, who served as senior staff economist for President Ronald Reagan’s Council of Economic Advisers, said raising taxes today would be risky because the economy remains fragile. But given the economy’s performance in the 1990s, returning marginal rates to their Clinton-era levels in 2013, as Obama proposes, wouldn’t be, he said. “It’s just hard to say that’s the kiss of death for economic growth,” Slemrod said.
In fact, Slemrod’s argument applies across the board. Historically, the United States has actually had some of its strongest periods of economic growth while taxes were high. As this graph from Slate shows, some of our strongest periods of growth in gross domestic product actually occured while taxes were very high:
In the 1950s, which had one of the sharpest periods of economic growth in all of American economic history, the top marginal tax rates for the richest Americans stretched above 90 percent. Likewise, economic growth in the relatively higher-taxed 1990s was much stronger than in the 2000s. This isn’t to say that higher taxes necessarily cause greater economic growth, but it does seem to show that higher taxes do not appear necessarily to be impeding job growth, nor are lower taxes especially helpful.
Income inequality was also very low in the 1950s as taxes were high.
As ThinkProgress reported in April, Wisconsin Gov. Scott Walker (R) proposed hiking taxes and fees on students and the poor, despite signing the Americans for Tax Reform “Taxpayer Protection Pledge,” which politicians use to promies to never raise taxes.
On Tuesday, the Wisconsin Legislature’s Finance Committee voted for a host of tax changes in its budget that included some of Walker’s proposals. The committee voted not only to limit many of Wisconsin’s tax credit programs for the poor, but it also simultaneously voted to cut business and investment taxes:
Wisconsin’s working poor with two-or-more kids would get a tax increase under a budget measure endorsed by the Legislature’s Finance Committee. Majority Republicans also pushed through some tax breaks for business and investors, as the panel began its final week of rewriting Governor Scott Walker’s state budget for the next two years. [...]
The committee also voted to roll back some of the 2009 tax hikes for multi-state corporations under the combined reporting law. And they voted to let people defer state taxes on long-term capital gains if they’re re-invested in a Wisconsin business. If the investment is held for five years, no taxes would be owed. Currently, 30-percent of capital gains are exempt from taxes.
Increasing taxes on the poor in the name of deficit reduction while offering more tax breaks for businesses and investment is a stunning statement on the committee’s priorities. “We hate poor people,” said Rep. Tamara Grigsby (D) in response to the changes. “We kick them when they’re down. They will never have the chance to thrive.” “This appears to be a tax increase on those who can least afford it,” said Rep. Jennifer Shilling (D).
Former Massachusetts Gov. Mitt Romney (R) is focusing the early part of his presidential campaign on the economy, slamming Obama’s performance while touting himself as an experienced job creator. But while he assigns Obama a failing grade on his job performance thus far, reports from his time as governor show that Romney’s record as a job creator isn’t as strong as he would like voters to think.
Massachusetts, which Romney governed from 2003-2007, ranked 47th among the 50 states in job creation numbers during his tenure.
Romney will officially launch his campaign later today in New Hampshire, again blaming Obama for having “failed America.” At campaign stops in Columbia, SC, and Des Moines, IA, over the past two weeks, Romney has consistently bemoaned lagging economic numbers during Obama’s time in office. ThinkProgress was in Des Moines Friday, when Romney told a crowd at the Des Moines Historical Building that Obama couldn’t manage an economic recovery because he has never had a real job:
ROMNEY: Our economy hasn’t returned to full employment like it should have. We’ve seen the slowest job recovery since Hoover. … What’s wrong is that this president put in place a series of economic steps that didn’t work. His agenda failed because he doesn’t understand how the economy works. It’s time to have a president who understands how to create jobs because he’s had one and knows how the economy works for the American people.
What Romney leaves out of his stump speech, however, is just how bad his state’s job creation statistics were during his four years as governor. Different job creation studies rank Massachusetts in the bottom four states during Romney’s administration. A study by the independent think tank MassINC ranked the state 49th in job creation from 2001-2007, ahead of only Michigan. And according to the U.S. Department of Labor, Massachusetts ranked 47th, ahead of only Michigan, Ohio, and Louisiana. Michigan and Ohio, both located in the Rust Belt, faced heavy job losses due to the flight of manufacturing jobs from the Midwest. Louisiana, meanwhile, lost hundreds of thousands of jobs in the aftermath of Hurricane Katrina in 2005.
During Romney’s period as governor, Massachusetts’ job growth was just 0.9 percent, well behind other high-wage, high-skill economies in New York (2.7), California (4.7), and North Carolina (7.6). The national average, meanwhile, was better than 5 percent.
Romney blames the poor job numbers on Democrats in the Massachusetts state legislature. But since its economy faltered in 2008 and 2009, Massachusetts has rebounded in the job creation ranks, emerging from the recession with some of the nation’s strongest job numbers. Under current Gov. Deval Patrick (D) — and a legislature still controlled by Democrats — the state experienced 4.2 percent job growth in the first quarter of 2011, better than twice the national average and good enough to rank in the top 10 nationally. That followed a year of solid growth in 2010, when Massachusetts was among the nation’s leaders in job growth.
The Department of Education today released long-awaited new regulations meant to curb abuses in higher education. As we’vebeen documenting, for-profit colleges — schools like the University of Phoenix or Kaplan University — have been collecting 90 percent of their revenue from the federal government while leaving their students buried in debt and with bleak job prospects. (For more background on this issues, see our primer, “For-profits, not students.”)
The new regulations are intended to cut off higher education programs from federal money if too many of their students can’t find good jobs and default on their loans. However, after months of intense lobbying by the for-profit schools, their front groups, and conservative lawmakers, the new rules are significantly weaker than draft rules first proposed by the Education Department last year.
The administration’s line of thinking seems to be that this is a first step that actually stands a chance of being implemented with minimal interruption from Capitol Hill and that more could always be done later. As Inside Higher Ed explained, the rules extend compliance time for the schools and weaken some requirements when it comes to student debt-load:
Compared to the original proposed regulations, the new rules will kick in later, give colleges more chances to fix problems and loosen several requirements on measuring debt and repayment. The first year that programs could lose eligibility is now 2015, three years later than previously proposed, and data collection will not begin until 2012. [...]
In the final regulations, the restricted status has been eliminated and replaced with the “three strikes” rule, which department officials say is closer to its policies in other areas, such as on student loan default rates. Colleges would have to fail to meet each of the criteria for three years out of four. In the meantime, they would not face enrollment caps.
Harris Miller, president and CEO of the Association of Private Sector Colleges and Universities, the industry’s largest trade group, said the Education Department “clearly listened to a lot of the concerns.”
For-profit colleges launched an unprecedented lobbying campaign in an attempt to water down these rules, pushing lawmakers on both sides of the aisle to voice their opposition to common-sense regulations. The industry spent more than $8 million lobbying in 2010 — doubling its total from the year before — and donated millions to key members of Congress. This included $100,000 to House Education Committee Chairman John Kline’s (R-MN) election campaign. ThinkProgress’ Lee Fang has much more on the industry’s lobbying war to maintain its access to federal dollars, including its extensive astro-turf efforts.
Binyamin Applebaum has a tragic article in The New York Times about how no help’s coming to the labor market that features a quote that sends shivers down my spine. He speaks to Eric Rosengren, President of the Boston Fed and generally one of the good guys, and President Rosengren explains that monetary policy won’t be coming to the rescue not so much because it can’t as because of political paralysis:
“We’ve done things that are quite unusual. We’re using tools that we have less experience with,” Mr. Rosengren said. “Most of the criticism has been that we’re being too accommodative. That is a concern that we have to put some weight on.”
Heather Boushey, senior economist at the Center for American Progress, a liberal research group, said that the Fed was being too cautious about inflation and too callous about joblessness.
“We have a massive unemployment problem in this country right now. It is festering. It’s not good for our economy. It’s not good for our society. And we have the tools to fix it,” she said. “We certainly need to be concerned about what happens down the road, but shouldn’t we first be concerned about getting the U.S. economy back on track?”
Obviously, I agree with my colleague. But part of what we’re seeing here are the policy consequences of the progressive movement’s strange monetary policy blindness. For the Fed to do anything “unorthodox” naturally opens the institution up to criticism. And if nearly 100 percent of the criticism is either from the hard money right or else is vague condemnations of “bailouts,” then this biases policy toward inaction. People need to understand that in economic policy terms, the Fed’s monetary policy committee is the single most important institution in the country. It’s not the only thing that matters, but it matters a lot. Talking about jobs without talking about the FOMC is like talking about the legal system and forgetting there’s a Supreme Court. Folks in Minneapolis for Netroots Nation this year should come to my panel on monetary policy.
The White House estimates that taxpayers will lose about $14 billion due to the rescue of Detroit’s auto companies, less than 20 percent of the total investment. Two years ago, the projected loss was 60 percent.